What makes a good charity a great one?

Some nonprofits say they have very committed people but that some are too inexperienced to do much for the organization.

Acquiescing to a compromise in the quality of people is something endemic to almost any kind of mediocre organization, whether it is a business or a nonprofit. In a great institution, people worry a lot about whether they have the right people in key seats. Now, you may not be able to affect every seat, but not all seats are key seats. You might not be able to change all the teachers in the school, but you can decide who sits in the principal’s seat. You may not be able to change your entire faculty, but you can decide who gets to become dean. You may not be able to pick and choose every volunteer, but you can pick key staff seats.

It’s also crucial to be rigorous about results. How do we know we’re doing better? If we’re looking at education and test scores, or maybe changes in the homeless population on the streets, it’s measurable in numbers. Is the number going up or down?

You’re not always going to be able to get metrics. Consider what Tom Morris did with the Cleveland Symphony. Morris (at the time, the orchestra’s executive director) tried to measure excellence, but it wasn’t always easy. Is it just ticket sales? No. Is it the fact they’re being invited to the best music festivals? No. Are people coming to hear the classic favorites or also coming to the more difficult programs? Is the orchestra getting more standing ovations, and if it is, does that mean the audience likes Mahler, or is it more about how the orchestra plays Mahler?

It was hard to know, but Tom would say that just because we can’t measure excellence, it doesn’t mean that we stop trying. Again, I go back to that idea about discipline. It’s discipline to know what’s important and discipline to know what results are. If I look at mediocre companies, they’ll say results don’t really matter. Great organizations say results do matter, and the question is always: are we getting better, are we getting better, are we getting better? And now that we’ve gotten better, how can we get better, still?

And for nonprofits?

We need to evaluate all social sector enterprises on outputs — how effective or how excellent they are, not just how much money they have. Do they deliver on their mission? That’s the important thing. When you’re deciding which company to invest in, what matters is their return on invested capital. That’s a clear output. What’s the return for a social sector enterprise? That’s going to vary from enterprise to enterprise.

So selectivity is key.

If you’re truly in a cause you care about, your work is too important to compromise on the rigor of getting the best people you can. It really comes down to being ultra-rigorous about saying no to the things that do not fit with where you could make a distinctive contribution and yes to the things that will make your system work and sustain you.

You have to have the discipline to say “no thank you” to opportunities, to say “no thank you” to the wrong donors, the ones who are going to ask you to do a special project that is outside the realm of what you can do the best. And so one of the critical things to keep in mind when you talk about a mission statement is that we can all improve our focus by looking closely at what we don’t do well. It’s about knowing when to say no, or knowing that it’s time to stop doing some things. That’s the first puzzle piece.

Second, what is your brand? That’s not a business thing. When people are trying to decide where to put their resources to support causes they care about, there’s something to be said for a hard-won, well-earned reputation, one that gives people confidence that their resources will be well placed and well managed. Even if donors can’t put what you do as a nonprofit in the form of a price-earnings ratio or an earnings-per-share number or growth rate, they can have confidence because of your reputation.

We see it all the time in the social sectors. There are brands. Brand is helpful for turning the flywheel.

There is, though, one critical thing to worry about, and that’s restricted funding. I understand why people have it. I understand why people want it. I would just suggest that it is contrary to what builds great organizations. Great organizations — not great programs — will make us, over time, a great society.

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